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UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 27, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 0-19725
PERRIGO COMPANY
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-2799573
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
515 EASTERN AVENUE
ALLEGAN, MICHIGAN 49010
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
(269) 673-8451
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK OCTOBER 21, 2003
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WITHOUT PAR 69,872,968
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PERRIGO COMPANY
FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated statements of income -- For the quarters
ended September 27, 2003 and September 28, 2002 1
Condensed consolidated balance sheets -- September 27, 2003,
June 28, 2003 and September 28, 2002 2
Condensed consolidated statements of cash flows -- For the quarters
ended September 27, 2003 and September 28, 2002 3
Notes to condensed consolidated financial statements -- September 27, 2003 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risks 11
Item 4. Controls and Procedures 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 14
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
First Quarter
-------------------------------
2004 2003
------------ ------------
(as adjusted)
Net sales $ 209,805 $ 213,215
Cost of sales 151,819 151,536
---------- ----------
Gross profit 57,986 61,679
---------- ----------
Operating expenses
Distribution 3,522 4,027
Research and development 5,713 5,448
Selling and administration 23,406 25,603
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Subtotal 32,641 35,078
Unusual litigation -- (3,128)
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Total 32,641 31,950
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Operating income 25,345 29,729
Interest and other, net (449) (208)
---------- ----------
Income before income taxes 25,794 29,937
Income tax expense 9,286 11,159
---------- ----------
Net income $ 16,508 $ 18,778
========== ==========
Earnings per share
Basic $ 0.24 $ 0.27
Diluted $ 0.23 $ 0.26
Weighted average shares outstanding
Basic 70,040 70,719
Diluted 71,809 71,745
See accompanying notes to condensed consolidated financial statements.
-1-
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 27, June 28, September 28,
2003 2003 2002
------------- ----------- -------------
Assets (unaudited) (unaudited)
Current assets (as adjusted)
Cash and cash equivalents $ 83,046 $ 93,827 $ 49,214
Accounts receivable 99,200 87,018 105,777
Inventories 149,872 160,326 163,704
Current deferred income taxes 30,359 32,643 23,484
Prepaid expenses and other current assets 10,844 5,383 8,635
----------- ----------- -----------
Total current assets 373,321 379,197 350,814
Property and equipment 431,777 429,115 405,258
Less accumulated depreciation 216,389 210,337 195,486
----------- ----------- -----------
215,388 218,778 209,772
Goodwill 35,919 35,919 35,919
Non-current deferred income taxes 6,677 3,968 3,668
Other non-current assets 19,140 6,108 4,295
----------- ----------- -----------
$ 650,445 $ 643,970 $ 604,468
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 67,616 $ 72,186 $ 78,431
Notes payable 7,191 8,980 8,729
Payroll and related taxes 22,354 40,535 23,232
Accrued expenses 41,276 36,590 39,740
Accrued income taxes 15,264 5,568 17,864
Current deferred income taxes 2,965 2,683 3,621
----------- ----------- -----------
Total current liabilities 156,666 166,542 171,617
Non-current deferred income taxes 25,538 25,484 22,722
Other non-current liabilities 4,727 3,520 3,079
Shareholders' equity
Preferred stock, without par value, 10,000 shares authorized -- -- --
Common stock, without par value, 200,000 shares authorized 90,363 88,990 80,120
Unearned compensation (56) (111) (499)
Accumulated other comprehensive income 187 1,282 952
Retained earnings 373,020 358,263 326,477
----------- ----------- -----------
Total shareholders' equity 463,514 448,424 407,050
----------- ----------- -----------
$ 650,445 $ 643,970 $ 604,468
=========== =========== ===========
Supplemental Disclosures of Balance Sheet Information
Allowance for doubtful accounts $ 9,321 $ 10,242 $ 8,050
Allowance for inventory $ 21,602 $ 21,717 $ 20,714
Working capital $ 216,655 $ 212,655 $ 179,197
Preferred stock, shares issued -- -- --
Common stock, shares issued 69,994 70,034 69,424
See accompanying notes to condensed consolidated financial statements.
-2-
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
First Quarter
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2004 2003
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Cash Flows From Operating Activities (as adjusted)
Net income $ 16,508 $ 18,778
Adjustments to derive cash flows
Depreciation 7,031 6,865
Compensation - stock options 1,318 1,333
Deferred income taxes (77) 746
Changes in operating assets and liabilities
Accounts receivable (12,352) (23,283)
Inventories 10,276 (8,188)
Accounts payable (4,439) 4,659
Payroll and related taxes (18,175) (8,104)
Income taxes payable 9,705 9,759
Accrued expenses 4,712 7,049
Other (6,312) (256)
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Net cash from operating activities 8,195 9,358
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Cash Flows For Investing Activities
Additions to property and equipment (4,993) (5,116)
Non-current note receivable (10,000) --
Investment in equity subsidiaries (1,000) --
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Net cash for investing activities (15,993) (5,116)
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Cash Flows For Financing Activities
Borrowings (repayments) of short-term debt, net (1,631) (156)
Issuance of common stock 400 143
Repurchase of common stock (343) (32,025)
Cash dividends paid (1,751) --
Other -- 59
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Net cash for financing activities (3,325) (31,979)
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Net decrease in cash and cash equivalents (11,123) (27,737)
Cash and cash equivalents, at beginning of period 93,827 76,824
Effect of exchange rate changes on cash 342 127
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Cash and cash equivalents, at end of period $ 83,046 $ 49,214
========== ==========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest paid $ 162 $ 257
Income taxes paid $ 579 $ 657
See accompanying notes to condensed consolidated financial statements.
-3-
PERRIGO COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 2003
(in thousands)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals and other adjustments) considered necessary for a fair presentation
have been included. The Company has reclassified certain amounts in the prior
years to conform to the current year presentation.
Operating results for the quarter ended September 27, 2003 are not necessarily
indicative of the results that may be expected for a full year. The unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes included in the Company's
annual report on Form 10-K for the year ended June 28, 2003.
The Financial Accounting Standards Board (FASB) Interpretation 46 (FIN 46),
"Consolidation of Variable Interest Entities", addresses consolidation by
business enterprises of variable interest entities. FIN 46 applies immediately
to variable interest entities created after January 31, 2003. The FASB deferred
the implementation of FIN 46 relating to potential variable interest entities
that existed prior to February 1, 2003 until the end of the first interim or
annual period ending after December 15, 2003. The Company is evaluating the
impact of FIN 46 and believes that the provisions of FIN 46 will not have a
material impact on the Company's consolidated financial position or results of
operations.
NOTE B - EARNINGS PER SHARE
A reconciliation of the numerators and denominators used in the basic and
diluted EPS calculation follows:
First Quarter
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2004 2003
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Numerator
Net income used for both basic and diluted EPS $ 16,508 $ 18,778
========== ==========
Denominator
Weighted average shares outstanding for basic EPS 70,040 70,719
Dilutive effect of stock options 1,769 1,026
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Weighted average shares outstanding for diluted EPS 71,809 71,745
========== ==========
-4-
Options outstanding that are anti-dilutive were 1,690 and 3,403 for the first
quarter of fiscal 2004 and 2003, respectively. These options are excluded from
the diluted EPS calculation.
NOTE C - INVENTORIES
Inventories are summarized as follows:
September 27, June 28, September 28,
2003 2003 2002
------------- ------------- -------------
Finished goods $ 58,282 $ 59,547 $ 66,765
Work in process 53,610 58,628 59,629
Raw materials 37,980 42,151 37,310
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$ 149,872 $ 160,326 $ 163,704
=========== =========== ===========
The Company maintains a reserve for estimated obsolete or unmarketable inventory
based on the difference between the cost of inventory and its estimated market
value. The inventory balances stated above are net of an inventory reserve of
$21,602 at September 27, 2003, $21,717 at June 28, 2003 and $20,714 at September
28, 2002.
NOTE D - SHAREHOLDERS' EQUITY
In fiscal 2004, the Company continued its common stock repurchase program.
Purchases are made on the open market, subject to market conditions, and are
funded by cash from operations. The Company has purchased shares of common stock
as follows:
Shares Total
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Fiscal 2004 25 $ 343
Fiscal 2003 3,296 33,682
Fiscal 2002 2,533 31,923
Fiscal 2001 137 1,089
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5,991 $ 67,037
========== ==========
Since November 2000, the Board of Directors has approved a total expenditure of
$80,000 with a remaining balance of $12,963 available to purchase additional
shares. The common stock repurchased was retired upon purchase for all years.
The Company has two stock option compensation plans for employees and directors.
Prior to the second quarter of fiscal 2003, the Company accounted for those
plans under the recognition and measurement provisions of Accounting Principles
Board Opinion 25, "Accounting for Stock Issued to Employees", and related
interpretations. No stock-based employee compensation cost was reflected in
results reported prior to the second quarter of fiscal 2003, as all options
granted under those plans had an exercise price equal to the market value of the
underlying common stock on the date of grant. Beginning in the second quarter of
fiscal 2003, the Company adopted the fair value recognition provisions of
Statement of Financial Accounting Standards (SFAS) 123, "Accounting for
Stock-Based Compensation", as amended by SFAS 148, for stock-based employee
compensation. All prior periods presented have been restated to reflect the
compensation cost that would have been recognized had the recognition provisions
of SFAS 123, as amended by SFAS 148, been applied to all awards granted to
employees after July 1, 1995. Compensation costs are included in selling and
administration operating expenses.
-5-
The adoption of the fair value method and the retroactive restatement method
selected by the Company resulted in a reduction of retained earnings at June 30,
2002 of $19,458, representing the cumulative stock option compensation recorded
for prior years net of the tax effect.
NOTE E - COMPREHENSIVE INCOME
Comprehensive income is comprised of all changes in shareholders' equity during
the period other than from transactions with shareholders. Comprehensive income
consists of the following:
First Quarter
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2004 2003
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Net income $ 16,508 $ 18,778
Other comprehensive income:
Foreign currency translation adjustments (1,095) 579
---------- ----------
Comprehensive income $ 15,413 $ 19,357
========== ==========
NOTE F - COMMITMENTS AND CONTINGENCIES
The Company is currently defending numerous individual lawsuits pending in
various state and federal courts involving phenylpropanolamine (PPA), an
ingredient formerly used in the manufacture of certain OTC cough/cold and diet
products. The Company discontinued using PPA in November 2000 at the request of
the United States Food and Drug Administration. These cases allege that the
plaintiffs suffered injury, generally some type of stroke, from ingesting
PPA-containing products. Many of these suits also name other manufacturers or
retailers of PPA-containing products. These personal injury suits seek an
unspecified amount of compensatory, exemplary and statutory damages. The Company
maintains product liability insurance coverage for the claims asserted in these
lawsuits. The Company believes that it has meritorious defenses to these
lawsuits and intends to vigorously defend them. At this time, the Company cannot
determine whether it will be named in additional PPA-related suits, the outcome
of existing suits or the effect that PPA-related suits may have on its financial
condition or operating results.
Guarantees of debt obligations are primarily issued to support borrowing
arrangements entered into by two of the Company's foreign subsidiaries. The
Company has guarantees of approximately $8,000 as of September 27, 2003.
Although this amount represents the maximum exposure to loss, the Company
believes the actual risk of loss is insignificant. Of this amount, $7,191 was
recorded in the financial statements as notes payable as of September 27, 2003.
NOTE G - SEGMENT INFORMATION
The Company has one reportable segment, store brand health care, that
encompasses two operating segments, OTC pharmaceuticals and nutritional
products. All other consists primarily of the operating segments Quimica y
Farmacia S.A. de C.V. (Quifa), the Company's Mexican operating subsidiary, and
Wrafton Laboratories Limited (Wrafton), the Company's United Kingdom operating
subsidiary, neither of which meet the quantitative thresholds for
-6-
separate disclosure. The costs related to the Company's entry into the market
for generic prescription drug products are included in all other and are
immaterial. The accounting policies of all of the operating segments are the
same as those described in the summary of significant accounting policies.
Store Brand All
Health Care Other Total
----------- ---------- ----------
First Quarter 2004
Net sales $ 190,725 $ 19,080 $ 209,805
Operating income $ 24,900 $ 445 $ 25,345
Operating income % 13.1% 2.3% 12.1%
First Quarter 2003
Net sales $ 195,069 $ 18,146 $ 213,215
Operating income $ 29,149 $ 580 $ 29,729
Operating income % 14.9% 3.2% 13.9%
NOTE H - RESTRUCTURING
Update of 2002 restructuring -- The Company approved a restructuring plan
related to its Mexican operating company, Quifa, in the fourth quarter of fiscal
2002. The implementation of the plan began in June 2002 and was completed in
September 2003. No additional charges related to the restructuring plan were
recorded in fiscal 2004. In the first quarter of fiscal 2004, $230 was paid
related to severance. Twenty-two administrative and production employees were
terminated. The activity of the restructuring reserve is detailed in the
following table:
Fiscal 2002 Restructuring
Severance and Other costs
-------------------------
Balance at June 28, 2003 230
Reduction (230)
----------
Balance at September 27, 2003 $ --
==========
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FIRST QUARTER FISCAL YEARS 2004 AND 2003
(in thousands)
RESULTS OF OPERATIONS
STORE BRAND HEALTH CARE
First Quarter
-----------------------------
2004 2003
---------- ----------
Net sales $ 190,725 $ 195,069
Gross profit $ 54,439 $ 57,017
Gross profit % 28.5% 29.2%
Operating expenses $ 29,539 $ 27,868
Operating expenses % 15.5% 14.3%
Operating income $ 24,900 $ 29,149
Operating income % 13.1% 14.9%
Net Sales
First quarter net sales for fiscal 2004 decreased $4,344 to $190,725 from
$195,069 during fiscal 2003. Net sales decreased approximately $18,000,
primarily due to lower unit sales of cough/cold and vitamin products. The
decline was offset by sales of new products including loratadine and
pseudoephedrine sulfate extended release tablets and a branded starch blocker.
Gross Profit
First quarter gross profit decreased $2,578 or 5% during fiscal 2004 compared to
fiscal 2003. The gross profit percent to net sales was 28.5% in fiscal 2004
compared to 29.2% in fiscal 2003. The decrease in gross profit percent was
primarily due to fixed costs related to lower production volumes and an
unfavorable mix of products sold in the first quarter of fiscal 2004.
Operating Expenses
First quarter operating expenses increased $1,671 or 6% during fiscal 2004
compared to fiscal 2003. Operating expenses were favorably impacted by unusual
litigation income of $3,128 in the first quarter of 2003. Selling and
administration decreased $1,216 primarily due to a reduction in compensation
related costs.
-8-
ALL OTHER
First Quarter
------------------------------
2004 2003
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Net sales $ 19,080 $ 18,146
Gross profit $ 3,547 $ 4,662
Gross profit % 18.6% 25.7%
Operating expenses $ 3,102 $ 4,082
Operating expenses % 16.3% 22.5%
Operating income $ 445 $ 580
Operating income % 2.3% 3.2%
Net Sales
First quarter net sales for fiscal 2004 increased by $934 or 5% to $19,080 from
$18,146 during fiscal 2003, primarily due to increased volume at Quifa.
Gross Profit
First quarter gross profit decreased by $1,115 or 24% during fiscal 2004
compared to fiscal 2003. The gross profit percent to net sales was 18.6% in
fiscal 2004 compared to 25.7% in fiscal 2003. The decrease was primarily due to
lower margin contract sales in the mix of products sold by Wrafton and the
decision to exit the small retailer market as a part of the restructuring at
Quifa.
Operating Expenses
First quarter operating expenses decreased by $980 or 24% during fiscal 2004
compared to fiscal 2003, primarily due to cost savings measures implemented at
Quifa as a result of the restructuring and exiting of the small retailer market.
INTEREST AND OTHER (CONSOLIDATED)
Interest income was $95 for fiscal 2004 compared to interest expense of $46 for
fiscal 2003. Other income was $354 for fiscal 2004 as compared to $254 for
fiscal 2003.
INCOME TAXES (CONSOLIDATED)
For the first quarter of fiscal 2004, the effective tax rate was 36.0% compared
to 37.3% for fiscal 2003.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $33,832 to $83,046 at September 27, 2003
from $49,214 at September 28, 2002. Working capital, including cash, increased
$37,458 to $216,655 at September 27, 2003 from $179,197 at September 28, 2002.
The Company's priorities for use of the cash and cash equivalents include
support of seasonal working capital
-9-
demands, investment in capital assets, opportunistic repurchase of common stock
and acquisition of complementary businesses that could leverage retailer
relationships, offer a product niche opportunity or support geographic
expansion.
Year-to-date net cash provided by operating activities decreased $1,163 to
$8,195 for fiscal 2004 compared to $9,358 for fiscal 2003. Earnings from
operations in the first quarter of fiscal 2003 included an after-tax benefit of
$2,000 from a vitamin litigation settlement.
Year-to-date net cash used for investing activities increased $10,877 to $15,993
for fiscal 2004 compared to $5,116 for fiscal 2003. In August 2003, the Company
entered into long-term agreements for the development and distribution of
certain generic products. As a part of the agreements, the Company loaned
$10,000 to its partner. Repayment of the note receivable is expected to begin in
fiscal 2007.
Capital expenditures for facilities and equipment for fiscal 2004 were for
normal equipment replacement and productivity enhancements. Capital expenditures
are anticipated to be $20,000 to $25,000 for the remainder of fiscal 2004.
Year-to-date net cash used for financing activities decreased $28,654 to $3,325
for fiscal 2004 compared to $31,979 for fiscal 2003 due to a reduction in common
stock repurchases.
In fiscal 2004, the Company purchased 25 shares of its common stock for $343.
Purchases are made on the open market, subject to market conditions, and are
funded by cash from operations. Since November 2000, the Board of Directors has
approved a total expenditure of $80,000 with a remaining balance of $12,963
available to purchase additional shares. The common stock repurchased was
retired upon purchase for all years.
In the third quarter of fiscal 2003, the Board of Directors adopted a policy of
paying regular quarterly dividends. The Company paid quarterly dividends of
$1,751 for fiscal 2004. The Company expects to continue paying quarterly
dividends in the foreseeable future.
The Company had no long-term debt at September 27, 2003 and had $75,000
available on its unsecured credit facility. Cash and cash equivalents, cash
flows from operations and borrowings from its credit facility are expected to be
sufficient to finance the known and/or foreseeable liquidity and capital needs
of the Company.
CRITICAL ACCOUNTING POLICIES
Determination of certain amounts in the Company's financial statements requires
the use of estimates. These estimates are based upon the Company's historical
experiences combined with management's understanding of current facts and
circumstances. Although the estimates are considered reasonable, actual results
could differ from the estimates. Discussed below are the accounting policies
considered by management to require the most judgment and to be critical in the
preparation of the financial statements.
Allowance for Doubtful Accounts - The Company maintains an allowance for
customer accounts that reduces receivables to amounts that are expected to be
collected. In estimating the allowance, management considers factors such as
current overall economic conditions, industry-specific economic conditions,
historical and anticipated customer performance,
-10-
historical experience with write-offs and the level of past-due amounts. Changes
in these conditions may result in additional allowances. The allowance for
doubtful accounts was $9,321, $10,242 and $8,050 at September 27, 2003, June 28,
2003 and September 28, 2002, respectively.
Inventory - The Company maintains an allowance for estimated obsolete or
unmarketable inventory based on the difference between the cost of the inventory
and its estimated market value. In estimating the allowance, management
considers factors such as excess or slow moving inventories, product expiration
dating, current and future customer demand, and market conditions. Changes in
these conditions may result in additional allowances. The allowance for
inventory was $21,602, $21,717 and $20,714 at September 27, 2003, June 28, 2003
and September 28, 2002, respectively.
Goodwill - Goodwill is tested for impairment annually or more frequently if
changes in circumstances or the occurrence of events suggest impairment exists.
The test for impairment requires the Company to make several estimates about
fair value, most of which are based on projected future cash flows. The
estimates associated with the goodwill impairment tests are considered critical
due to the judgments required in determining fair value amounts, including
projected future cash flows. Changes in these estimates may result in the
recognition of an impairment loss. The required annual testing of goodwill is
performed in the second quarter of the fiscal year.
Product Liability and Workers' Compensation - The Company maintains reserves to
provide for claims incurred that are related to product liability and workers'
compensation. In estimating these reserves, management considers actuarial
valuations of exposure based on loss experience. These actuarial valuations
include significant estimates and assumptions, which include, but are not
limited to, loss development, interest rates, product sales and payroll
expenses. Changes in these estimates and assumptions may result in additional
reserves. The reserve for product liability claims was $3,473, $3,229, and
$1,648 at September 27, 2003, June 28, 2003 and September 28, 2002,
respectively. The reserve for workers' compensation claims was $3,479, $3,632
and $3,451 at September 27, 2003, June 28, 2003 and September 28, 2002,
respectively.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements in Management's Discussion and Analysis of Results of
Operations and Financial Condition and other portions of this report are
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to the safe harbor created
thereby. These statements relate to future events or the Company's future
financial performance and involve known and unknown risks, uncertainties and
other factors that may cause the actual results, levels of activity, performance
or achievements of the Company or its industry to be materially different from
those expressed or implied by any forward-looking statements. In some cases,
forward-looking statements can be identified by terminology such as "may,"
"will," "could," "would," "should," "expect," "plan," "anticipate," "intend,"
"believe," "estimate," "predict," "potential" or other comparable terminology.
Please see the "Cautionary Note Regarding Forward-Looking Statements" on pages
25-30 of the Company's Form 10-K for the year ended June 28, 2003 for a
discussion of certain important factors that relate to forward-looking
statements contained in this report. Although the Company believes that the
expectations reflected in these forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct. Unless
otherwise required by applicable securities laws, the Company disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
The Company is exposed to market risks, which include changes in interest rates
and changes in the foreign currency exchange rate as measured against the U.S.
dollar.
-11-
The Company is exposed to interest rate changes primarily as a result of
interest income earned on its investment of cash on hand and interest expense
related to its variable rate line of credit used to finance working capital when
necessary and for general corporate purposes. The Company had invested cash and
cash equivalents of $83,046 and no outstanding borrowings on its credit facility
at September 27, 2003. Management believes that a fluctuation in interest rates
in the near future will not have a material impact on the Company's consolidated
financial statements.
The Company has operations in Mexico and the United Kingdom. These operations
transact business in the local currency, thereby creating exposures to changes
in exchange rates. The Company does not currently have hedging or similar
foreign currency contracts. Significant currency fluctuations could adversely
impact foreign revenues; however, the Company does not expect any significant
changes in foreign currency exposure in the near future.
Item 4. Controls and Procedures
As of September 27, 2003, the Company's management, including its Chief
Executive Officer and its Chief Financial Officer, have reviewed and evaluated
the effectiveness of the Company's disclosure controls and procedures pursuant
to Rule 13a-15(b) of the Securities Exchange Act of 1934. Based on that review
and evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures are adequate and
effective in ensuring that all material information relating to the Company and
its consolidated subsidiaries required to be included in the Company's periodic
SEC filings would be made known to them by others within those entities in a
timely manner and that no changes are required at this time.
In connection with the evaluation by the Company's management, including its
Chief Executive Officer and Chief Financial Officer, of the Company's internal
control over financial reporting pursuant to Rule 13a-15(d) of the Securities
Exchange Act of 1934, no changes during the quarter ended September 27, 2003
were identified that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number Description
3(a) Amended and Restated Articles of Incorporation of
Registrant, incorporated by reference from Amendment
No. 2 to Registration Statement No. 33-43834 filed
by the Registrant on September 23, 1993.
3(b) Restated Bylaws of Registrant, dated April 10, 1996,
as amended, incorporated by reference from the
Registrant's Form 10-K filed on September 6, 2000.
-12-
4(a) Shareholders' Rights Plan, incorporated by reference
from the Registrant's Form 8-K filed on April 10,
1996. (SEC File No. 00-19725).
10(a)* Registrant's Management Incentive Bonus Plan,
effective June 29, 2003.
31 Rule 13a-14(a) Certifications.
32 Section 1350 Certifications.
* Denotes management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
On August 11, 2003, the Company furnished under Items 9 and 12 its
August 11, 2003 press release containing its full year and fourth
quarter earnings release for the year ended June 28, 2003.
-13-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PERRIGO COMPANY
-----------------------------------
(Registrant)
Date: October 23, 2003 By: /s/David T. Gibbons
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David T. Gibbons
Chairman, President and Chief Executive Officer
Date: October 23, 2003 By: /s/Douglas R. Schrank
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Douglas R. Schrank
Executive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
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